Mashreq Successfully Prices Additional Tier 1 Bond Offering at $500 Million

Mashreq, a leading financial entity in the Middle East and North Africa (MENA), has announced the successful pricing of its $500 million Additional Tier 1 bond offering. This offering, set at a coupon of 7.125% per annum, was finalized on Monday, 3rd June 2024. The institution boasts stable outlook ratings from esteemed agencies: A by Fitch, A3 by Moody's, and A by S&P.

The latest maneuver signifies Mashreq's triumphant return to the debt capital markets after its last issuance in 2022. It also sets a new benchmark for pricing efficiency, achieving the largest price tightening by any UAE bank for an Additional Tier 1 issuance in the past five years. This marks a significant milestone in the UAE's banking sector, highlighting Mashreq's robust market position and investor confidence.

Following a global investor call and an intensive marketing phase, which included a physical roadshow in London, Mashreq initiated the order books on 3rd June 2024. The initial price thoughts targeted the high 7% area, aiming for a transaction size of $500 million. Early in the process, the demand surged, allowing Mashreq to announce a book update exceeding $1 billion. This significant interest enabled a guidance shift of over 50bps inside of the initial price thoughts, with the orderbook swelling to more than $2.1 billion at an early stage.

Despite a considerable yield adjustment, investor interest from both regional and international accounts remained steadfast. This allowed Mashreq to finalize the offering with a yield of 7.125% and set the pricing for the Perpetual Non-Callable 5.5-year Additional Tier 1 bond offering at a reset margin of +270.5bps. This achievement records the tightest ever margin for Mashreq for any subordinated Additional Tier 1 or Tier 2 capital issuance and represents the lowest coupon for any UAE bank's Additional Tier 1 offering in the last three years.

Leadership Remarks and Investor Distribution

Mashreq's Group Chief Executive Officer, Ahmed Abdelal, expressed satisfaction with the transaction, highlighting the strong investor engagement and support. "The oversubscription amid a volatile market is particularly gratifying. This transaction will enable Mashreq to continue its growth plans into 2024 and beyond," he remarked. Chairman H.E. Abdul Aziz Al Ghurair also extended his congratulations to the team for executing Mashreq's most successful capital notes issuance to date.

The distribution of the transaction showcased a significant lean towards the Middle East, with 77.5% of the allocation, while Europe, including the United Kingdom, accounted for 19.5% of the demand. The remainder was split between Asian markets and offshore US interest. Notably, real money demand from private banks and high-quality asset managers dominated the issuance, securing 90% of the allocations, with the balance taken up by bank treasury divisions and hedge funds.

The bookrunners for this issuance included a consortium of leading financial institutions: Abu Dhabi Commercial Bank, Al Ahli Bank of Kuwait (DIFC Branch), BofA Securities, Citi, Emirates NBD Capital, First Abu Dhabi Bank, Kamco Investment Company, Mashreq, and Mizuho. This collaboration underscores the significant trust and recognition Mashreq commands in the investment community, both regionally and internationally.

This strategic financial move by Mashreq not only reinforces its standing in the global markets but also highlights the growing investor confidence in the UAE's banking sector. The successful bond offering is a testament to Mashreq's solid financial foundation and its capacity to attract substantial international and regional investment, paving the way for future growth and expansion.